Oil Transparency Issues in Sudan Raise Red Flag for Post-Referendum

Oil Transparency Issues in Sudan Raise Red Flag for Post-Referendum

Posted by Amanda Hsiao on March 18, 2010

Promises for greater oil revenue transparency by both North and South Sudan have gone unfulfilled, according to a Global Witness statement yesterday, pointing to a potential hurdle that may derail the referendum process. The organization reported yesterday that there still are conflicting accounts of how much oil is being produced in the country. Figures published by the Chinese National Petroleum Company, one of the oil companies operating in Sudan, suggest that the Sudanese government is underreporting oil output by about 12 million barrels—enough oil to power a city the size of San Francisco for an entire year, the organization said.

By underreporting oil production, the government in Khartoum could be receiving more than its share—the 2005 peace agreement signed by the North and the South dictates that oil profits should be split 50-50. Though both governments promised to conduct an audit, after reports of discrepancies first emerged last year, these promises have so far been unmet. Global Witness’s Rosie Sharpe said:

"The authorities in the north are responsible for stating how much oil was produced. The south has no way of checking whether these figures are correct and therefore whether the revenues the southern government receive are correct. This is a critical issue and one which could be decisive in determining whether the upcoming referendum on independence passes off peacefully."

The huge role oil will play in whether the South’s potential secession will lead to violence cannot be overstated. One important step toward maintaining peace is to have the two ruling parties, the SPLM and the NCP, begin talking about oil arrangements in the case of a split, as soon as possible. Having an agreement set before southerners vote on whether to secede means establishing expectations for both parties, whatever the outcome. Of course, sustained peace will depend on the actual implementation of the negotiated arrangement, which cannot occur without a more transparent process, in which both northern and southern stakeholders are included. In a post-referendum setting, regardless of the outcome of the vote, discrepancies of couple million barrels of oil may be all the difference between peace or war.